Using Monthly Installment Loans to Avoid Debt Traps
Unfortunately, for too many people, it is far too easy to fall into the trap of debt. Revolving debt is the type of debt that occurs in a vicious cycle and it never seems to stop, no matter how hard you try to pay it off. In general, this is the type of debt that typically applies to credit cards and personal loans, which have high interest rates and other terms that are considered unreasonable by many. There is a solution, however, for revolving debt that can help. Installment loans can help you when you have credit card debt in a few ways.
What are Installment Loans?
Installment loans are the types of loans that consist of equal payments over a set period of time. The most common type is monthly installment loans. In general, there are two chief types of these loans that are available to consumers:
- Secured Installment Loans: Secured installment loans are those that are given to ensure that a lender will be able to claim an asset if the borrower is unable to pay them back. Usually, items such as car loans and mortgages are put up as collateral. These loans generally carry lower interest rates because the lender can repossess the individual’s vehicle or foreclose on their home.
- Unsecured Installment Loans: Unsecured installment loans do not require any collateral put up by the borrower. They are other types of loans, like personal loans or student loans and carry higher interest rates due to the lender facing a larger risk.
Usually, installment loans fall under the category of unsecured loans and do not require collateral by the borrower. However, in order to get one of these loans, you must be approved for it and prove that you receive a regular source of income, steady paychecks and you must have a valid social security number and checking account.
Can Installment Loans Affect Your Credit Score?
Your payment history has the biggest impact on your credit score. If you make timely payments toward your credit, it can help to improve your score. Of course, conversely, making late payments will cause your credit score to dip. If you lose an asset because you have taken out a secured installment loan, it can be devastating to your credit. If you believe you might have difficulty in paying back the loan, it’s wise to avoid getting that type of installment loan and instead opt for one that is unsecured.
How Can Installment Loans Help You Pay off Debt?
Although there are many different types of loans available, installment loans are generally more desirable than personal loans or payday loans because the terms are usually more reasonable. Their payment requirement is evenly spread out over the term of the loan and can last for several months.
Can the Loan Help When Your Credit is Bad?
One of the best uses for an installment loan is to help you to build or repair your credit. Even if your credit is bad, you can gradually improve your score. You can also escape the cycle of debt trap and finally pay off your debt.
If you are struggling with credit card debt and see no other solution, you might want to consider getting monthly installment loans.